Conservative Governors Are Right to Resist Medicaid Expansion

By Ashton Ellis | July 12, 2012 | Center for Individual Freedom

In the aftermath of the Supreme Court’s decision upholding ObamaCare, at least this much is clear: conservative governors are refusing to help socialize healthcare by expanding a Medicaid program that will bankrupt their states.

Here’s how some are framing it.

New Jersey’s Chris Christie calls it “extortion.”

Nikki Haley of South Carolina says it’s “un-American.”

Phil Bryant says Mississippi “can’t afford it.”

Rick Scott in Florida declares it “inconsistent” with his “mission to grow jobs.”

And Texan Rick Perry likens compliance to having “a gun to (the) head” or “adding a thousand people to the Titanic.”

It’s easy to see why they’re upset.

When the Supreme Court upheld ObamaCare’s individual mandate as a tax on individuals, it also struck down a penalty on states for not increasing their Medicaid spending.

As originally written, ObamaCare sought to entice states to expand their Medicaid rolls by covering all of the states’ added expenses for 2014-17, the first three years of implementation.  Thus, states would be able to expand Medicaid eligibility up to 138 percent of the federal poverty line, adding millions of new people to their Medicaid rolls while letting Uncle Sam pick up the tab.

Then reality starts to set in.  In 2017, ObamaCare reduces its Medicaid subsidy to 95 percent, eventually falling to 90 percent in 2020 and thereafter.  Thus, after three years of pain-free entitlement expansion, states would start to be on the hook for up to 10 percent of the expanded spending.

As Chief Justice John Roberts noted in his ObamaCare decision, the average state spends 20 percent of its budget on Medicaid right now.  Some states with large poor populations – the demographic most served by Medicaid – spend over 40 percent.

What Roberts didn’t say is that many states are addicted to Medicaid’s open-ended matching guarantee.  For every dollar a state budgets for Medicaid, the federal government, on average, contributes 60 cents in subsidies.  Since there is no limit to how much the federal government will spend, Medicaid gives states an incentive to overspend.

The numbers are obscene.  A report by Physicians for Reform tracks the increase in national Medicaid expenditures from $75 billion in 1990 to $427 billion in 2010.  This corresponds with the 192 percent increase over the past two decades in inflation-adjusted, per capita state Medicaid spending.

Overspending on Medicaid is having a crowding out effect on state budgets.  During the last twenty years, increased Medicaid spending has come at the expense of funding other important state services.  To compare, state Medicaid spending was four times larger than on education, and nine times larger than on transportation.

All of this undoubtedly played a pivotal, if unmentioned, role in the Supreme Court’s ObamaCare decision.  According to ObamaCare’s terms, any state that refused to expand its Medicaid coverage – and the federal government’s three-year subsidy – would risk losing all of its federal matching funds to maintain its current level of services.

In effect, ObamaCare changed the rules of the Medicaid game by coercing the states to spend even more on the program.  And since federal matching funds average more than 10 percent of every state’s budget, the Court said the penalty for not expanding Medicaid was too high a price to pay under the Constitution and struck it down.

But even with the Medicaid penalty gone, conservative governors are right to be wary of participating in ObamaCare’s Medicaid expansion.

From the outset, President Barack Obama and his liberal allies in Congress have been clear that their ultimate goal is government-run health care.  When they couldn’t get a single-payer system, they tried to insert a so-called public option to compete with private insurance.  It was stripped out when it became clear that the public option would be subsidized by the government in order to attract customers at below-market rates.  Supporters of socialized healthcare could then kill off private competitors with subsidized insurance before declaring the free market had failed and the federal government would then insure everyone.

After the public option died, attention turned to Medicaid expansion as a way to get more people on government insurance by reaching higher up the income ladder.  Indeed, studies show that when states expanded Medicaid eligibility in the past, 6 of every 10 new Medicaid recipients were people who already had health insurance.  Thus, under ObamaCare, Medicaid expansion will become the new public option.

The only way to stop ObamaCare’s steady increases in state spending toward government-run healthcare is for conservative governors to fully reject any and all compliance with ObamaCare’s Medicaid expansion.  Those that recognize and do this should be applauded.  It’s time for others to join them.

View the original article here.

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